“I took myself a blue canoe
And I floated like a leaf” …” Elton John – Tumbleweed Connection
Many people are feeling overwhelmed with the current state of the market and asking what to do. “It is what it is” as the man said. So how do we decide when to attempt to stay in our home and when do we make the business decision to sell now, take our Paper losses or Actual profits and move on? This is a complicated and emotionally charged question, especially in these uncertain economic times.
As a Broker and Realtor, I believe my highest duty is to give my clients and community the best information available, all the information. Then together we will try and make sense of it for each individual situation.
Here are some factors to use when determining what to do next.
1) How long do you intend to stay in your local area? I am using 5 years as short term vs long term.
2) How much do you currently owe on your home?
3) How much is your house currently worth? (It is worth what someone is willing to pay for it, in this market, within 90 days or so.) Take out the emotion.
4) How far below your homes high point is it in terms of percentage i.e. 10%, 30%, 50%
5) When will this market “stabilize”. My definition of stable is less short sales and bank owned than normal re-sales (with equity). I believe late 2009 or mid 2010.
6) When it does stabilize what will be the annual rate of appreciation going forward. Gone are the days of 20% per year or even 37% per year for deep water homes. (This is a good thing!)
7) How many years will it take at that projected appreciation rate for you home to regain it previous high point value? Historical national average is around 4% per year over 30 years. Include factors like rising gas costs effects on your local area (commute costs, recreation costs, costs of goods).
8) How much in actual dollars (after tax) will you spend on your existing mortgage(s) including projected resets for ARM’s will you spend over that time period?
Now you have an investment model. You will invest X dollars over X years for X gain on that investment.
Look at the answers honestly and realistically and make a decision. If you run those numbers and find that you will be investing say twice what your return will be then make your decision based on your brain and not your heart. Run a rent vs. buy calculator and play what if you invest the difference in other forms of investment. We will always have housing costs, but these costs need to make sense.
If you have a positive gain on your investment congratulations, you can relax.
I am always available to help you with an evaluation of your home and the market. If you would like some help in determining what to do next, please feel free to call on me to help you.
Marston
